dawn
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Post by dawn on Oct 23, 2015 15:43:14 GMT
The auction for this loan finished on 14th October. I was told by Lending Crowd that W*** H***** took their (our) money today (23rd October). Their first repayment is due on 14th December. I queried this with Lending Crowd - who have been very quick and helpful in their replies - it is just that I don't agree with them. They said in reply to my question about the date (shouldn't it be 14th November?)
"Although the loan auction finished on 14 October the funds have actually only been paid out today, therefore it was agreed that the repayment will be in December."
I asked "Can you explain when interest is calculated from? Are we expecting one months interest on 14th December or more? If the former does that mean they effectively have the loan for 3 weeks and pay no interest (and we earn no interest)?"
Their reply - "The repayment will be the same regardless of when the first one falls due. Overall it will not impact if the loan is held until maturity."
This is where we differ - I think it will have an impact - effectively we don't start earning interest until 14th November - a full month after the auction ended plus the time before when money was tied up and not earning. I have now asked (and am waiting for a reply) "Many thanks for explaining that. I disagree about the impact - although the impact will be small. I will need to hold the loan for 60 months and 3 weeks for a 60 month loan and therefore my return will be slightly lower. I also will be delayed in re-investing repayments by 3 weeks each month and the compound effect of that will be much larger. I don't have much of a problem with the company paying one month after they draw down the cash rather than the end of the auction, but giving them an additional 3 weeks interest free period at the expense of the lenders isn't fair on the lenders".
My question is are they right to delay the first repayment for this company in this way? If not, what can be done to persuade them to sort it out / not do it again.
I stress that the lady at Lending Crowd has been very quick and helpful in her replies - just I don't agree with what they have done.
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Post by Deleted on Oct 29, 2015 10:03:55 GMT
Thank you for pointing out this 'problem'.
I fully agree with you. For a lending company, allowing almost an extra month for free to a borrower (and with somebody else's money) is completely UNACCEPTABLE.
And to me looks incredible the answer they gave you. It shows full incompetence (so much that I am now tempted to put on sale everything I have and withdraw as soon as possible).
Any single day a single penny is lent out to a borrower should be accounted by the system and regardless of the agreements on the first payment date, it should be paid. i.e. Loan was accepted/money transferred on 23 October? Then the interest should start accruing from 23 October. If the initial payment date is 14 December, this first payment should include all interest accumulated in the period 23 October -14 November (plus of course 14 November -14 December).
If LendingCrowd people don't get the basics of this, they should go back to primary schools....
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Post by Deleted on Oct 29, 2015 10:31:31 GMT
The auction for this loan finished on 14th October. I was told by Lending Crowd that W*** H***** took their (our) money today (23rd October). Their first repayment is due on 14th December. I queried this with Lending Crowd - who have been very quick and helpful in their replies - it is just that I don't agree with them. They said in reply to my question about the date (shouldn't it be 14th November?) " Although the loan auction finished on 14 October the funds have actually only been paid out today, therefore it was agreed that the repayment will be in December." I asked " Can you explain when interest is calculated from? Are we expecting one months interest on 14th December or more? If the former does that mean they effectively have the loan for 3 weeks and pay no interest (and we earn no interest)?" Their reply - " The repayment will be the same regardless of when the first one falls due. Overall it will not impact if the loan is held until maturity." The answer LendingCrowd has given you is FACTUALLY WRONG. Of course any single day a sum is given out for free to a borrower will have an impact on the overall return. And even if LC is not capable of thinking to the smaller numbers (very dangerous anyway), think to those deciding to sell the loan soon (say in December). they will get HALF the expected/publicised return. I suggest that every single lender complaints STRONGLY about this with LC. There are three possible solutions: a) LC admits this huge mistake and pays out of its own pocket the interest due for the period 23 October - 14 December 2015. b) LC reschedule the payments starting at 23 November 2015 c) LC asks the borrower to pay for the extra weeks and adds the interest for the period 23 october - 14 December to the first repayment.
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arbster
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Post by arbster on Oct 29, 2015 10:50:57 GMT
This is where we differ - I think it will have an impact - effectively we don't start earning interest until 14th November - a full month after the auction ended plus the time before when money was tied up and not earning. I have now asked (and am waiting for a reply) " Many thanks for explaining that. I disagree about the impact - although the impact will be small. I will need to hold the loan for 60 months and 3 weeks for a 60 month loan and therefore my return will be slightly lower. I also will be delayed in re-investing repayments by 3 weeks each month and the compound effect of that will be much larger. I don't have much of a problem with the company paying one month after they draw down the cash rather than the end of the auction, but giving them an additional 3 weeks interest free period at the expense of the lenders isn't fair on the lenders". My question is are they right to delay the first repayment for this company in this way? If not, what can be done to persuade them to sort it out / not do it again. I stress that the lady at Lending Crowd has been very quick and helpful in her replies - just I don't agree with what they have done. Hi dawn - did you get a reply from lendingcrowd? I have checked the repayment schedule for the loan and it certainly does seem to be based upon a 14th November start, which is clearly wrong. If LendingCrowd has advanced our money to the borrower already, and we're taking risk on that, then we should be being paid interest, at the very least. The inefficiencies of the LC platform, in terms of very long auction durations, auctions being extended unexpectedly, and long periods before draw-down mean that the rate of return is somewhat lower than the headline rate already, without this kind of behaviour adding to things. I'm still hoping this is simply related to the relative "youth" of the platform, but giving away our money like this indicates a process failure, which is more worrying.
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jimbob
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Post by jimbob on Oct 29, 2015 11:21:25 GMT
I think Lendingcrowd needs to make a 1 month ex-gratia payment of £216.80 on the loan (The equivalent of 1 month's interest). That keeps things simple - any other solution gets messy and fast. Not in this one personally.
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arbster
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Post by arbster on Oct 29, 2015 11:49:02 GMT
RS allow consumer borrowers to set the first repayment date up to 60 days from drawdown (iirc, westonkevRS ? ). I took a loan out a good few years ago and was offered the same flexible start so it's not unusual in the loan market. I've not heard of it before for business loans, but then the vast majority of my experience is through P2P. FC's process of starting to accrue 7 days after listing is very agreeable for lenders and possibly what we have come to expect? I'm not too exercised about the date of the first repayment, but do object to the principle of a month's interest being paid for having the money for 7+ weeks.
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Post by Deleted on Oct 29, 2015 11:55:14 GMT
RS allow consumer borrowers to set the first repayment date up to 60 days from drawdown (iirc, westonkevRS ? ). I took a loan out a good few years ago and was offered the same flexible start so it's not unusual in the loan market. I've not heard of it before for business loans, but then the vast majority of my experience is through P2P. FC's process of starting to accrue 7 days after listing is very agreeable for lenders and possibly what we have come to expect? FC starts to accrue money from the day the auction has officially ended. It offers the borrower 7 days to decide, but the first repayment date is exactly 30 days after the end of the auction! So in this case with FC you would have: - end of auction: 14 October - the borrower has time to decide 14 october - 21 October. If he accepts: - the first repayment date is 14 November (hence NO free money to the borrower!!! He even pays for those 7 days of thinking when the money is still in FC coffins). In such case LC has given EXACTLY a month of free money with respect what is the FC policy (with FC on the 14 December you would get your SECOND repayment, here with LC wrong decision you still have the FIRST!!!)!!! This is worryingly wrong, but more worrying to me is to receive such wrong answers, which denote total lack of understanding of the basic maths behing loans.
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SteveT
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Post by SteveT on Oct 29, 2015 12:22:21 GMT
Is that really what LC meant by their replies (see OP)? I read that as the loan started on 23rd Oct, when interest inevitably had to start accruing. However the first repayment date has been agreed to be made in Dec. Over the lifetime of the loan, all of the capital and all of the interest will have to be repaid, only over 1 fewer payments (so the regular monthly repayment figure will be fractionally higher as a result).
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arbster
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Post by arbster on Oct 29, 2015 12:37:54 GMT
Is that really what LC meant by their replies (see OP)? I read that as the loan started on 23rd Oct, when interest inevitably had to start accruing. However the first repayment date has been agreed to be made in Dec. Over the lifetime of the loan, all of the capital and all of the interest will have to be repaid, only over 1 fewer payments (so the regular monthly repayment figure will be fractionally higher as a result). I've not unpicked the numbers, but the repayment schedule shows 60 payments, starting on 14/12/2015 and finishing on 14/11/2020. The first repayment does not seem to include extra interest to cover the period from 23/10/2015 to 13/11/2015. Without working out the average rate of all the active bids, I don't know if they've messed about with the numbers behind the scenes to engineer a higher rate, which would be one (inelegant) solution, but I suspect not.
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dawn
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Post by dawn on Oct 29, 2015 12:39:05 GMT
I didn't get any reply to the last email I sent on 23rd October so on 27th I sent
"Can you confirm that for the W*** H***** loan investors will not be paid interest from the either the date of the end of auction or from the date they took the money. That interest will only start to accrue from 14th November and the 1st payment will be on 14th December. That is my understanding from below. If I had known that was likely to be the case I would not have invested in this company. I do not like having my money tied up for 3/4/5 weeks earning no interest and where I can't access it. The borrower in this case has managed to wangle nearly a month of interest free loan at the expense of the investors and I am not happy. I do not have much invested with you at present and am now less likely to add more if this is normal procedure."
Their response was
"Normally, the first loan repayment is between 4 and 6 weeks this one is slightly beyond this due to the delay in completing the paperwork. We work with the business to ensure that the repayment date ties in when cash is available in the business so that not all their bills fall due at the same time. This ensures a more successful rate in payments being on time.
We hope that you will continue to invest with us. Investments in the Loan Exchange guarantee that you earn interest from the date that you invest which you may feel is more appropriate."
I understand the need to tie payment dates to when money comes in - I do the same for my normal household bills. However I also accept that to do that the first payment may be slightly larger to cover a slightly longer period. I would not expect the electricity company to give me 2 weeks free electricity just so I could fix my payment date to something that is convenient for me. I don't have much of a problem with a delayed payment date (provided when it comes it covers all of the period up to that date) but I have a major problem with a month of earning no interest with no access to my money and with no idea beforehand that this was even possible. Even their answer above of "first loan repayment is between 4 to 6 weeks" doesn't say that no interest is earned. And whose delay in completing paperwork - Lending Crowd or the borrower - either way why is it the lenders who lose out - we didn't delay any paperwork.
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Post by Deleted on Oct 29, 2015 13:00:06 GMT
Their response was "Normally, the first loan repayment is between 4 and 6 weeks this one is slightly beyond this due to the delay in completing the paperwork. We work with the business to ensure that the repayment date ties in when cash is available in the business so that not all their bills fall due at the same time. This ensures a more successful rate in payments being on time. This answer is a total joke. But is this a person taking decisions? I am honestly puzzled how on earth you can run a lending company when you feel necessary to 'work with the business to ensure that the repayment date ties in when cash is available' (  what? we have just given this company 30k GBP and you think they might have a problem with cashflow even before the first repayment? How did this company pass the preliminary checks??). And most of all how on earth you (LC) think you are entitled to give lender's money for free for a prolonged period of time at your will, without asking/consulting/warning the lenders? I am sorry, but this is enough to me. Honestly to me is impossible to give any money to a lending company answering or even only reasoning like this. It make FC look spectacular in comparison.
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Post by lendingcrowd on Oct 29, 2015 17:21:26 GMT
Hi everyone,
We appreciate you raising your concerns about this loan.
We have reviewed the situation for this loan, and are reviewing our policies as a result.
We will contact each investor who has invested in this company individually to explain what course of action we will be taking.
Kind regards,
LendingCrowd
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ablender
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Post by ablender on Oct 29, 2015 17:25:40 GMT
It is appreciated that you are taking such steps. I hope it would lead to a good final conclusion.
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Post by Deleted on Oct 29, 2015 17:50:05 GMT
I have received the LC letter/proposal and am not happy with it.
In particular LC propose a new mechanism of interest accrual which is as clear as mud and as manipulable as they wish...
(they would like to propose to start the interest accrual on the date the money is released, which of course is unknown and not verifiable by the lenders....).
I decided not to invest anymore on this network, but for the benefits of all lenders I strongly suggest that all insist for LC to adopt a simple and transparent rule, i.e.
"a Loan starts accruing interest from the date in which the Loan Auction has closed".
The end of the auction is a date which is CERTAIN and known to lenders (differently to the date of money transfer which is unknown and makes things
extremely muddy and arbitrarily manipulable...). Moreover this also incentive borrowers to take quick actions in accepting/refusing the loan, which is necessary to speed up the whole extremely slow current LC process...
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SteveT
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Post by SteveT on Oct 29, 2015 20:27:33 GMT
Whilst I certainly favour sites where interest accrual begins immediately (ideally on bidding like SS / MT / AR, or else on auction closing), there are several platforms where there can be a delay of a few days whilst pre-drawdown paperwork is finalised. Anything longer is not acceptable, which even FS seem now to have recognised with some of their extended property loan hang-ups
However, the fundamental point is that interest MUST always begin to accrue from the moment funds are transferred to the Borrower
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what?
